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Attorneys cannot agree to settlements for clients

Jennifer Nelson
January 1, 2007
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The fact a party authorizes an attorney to enter settlement negotiations and knows the negotiations are occurring does not mean that the attorney has authority to approve a settlement, according to a ruling today by the Indiana Court of Appeals.

In Carol and David Bay v. Michael Pulliam and Cardinal Transportation, LLC, 49A05-0612-CV-704, the Court of Appeals reversed a Marion Superior Court decision that granted a motion to enforce settlement agreement in favor of Pulliam and Cardinal Transportation. At issue was whether a settlement between an attorney for the Bays and Pulliam's insurance company could be binding if the Bays did not agree to it.

Carol Bay was injured during a vehicle accident involving a Cardinal truck driven by Pulliam. The company and Pulliam were insured by Zurich Insurance, North America. The Bays hired the Nunn Law Office to represent them. The settlement negotiations were between the Nunn office and Zurich, which through correspondence disclosed various settlement demands and offers of settlement from Zurich. Attorney Ken Nunn signed each demand letter, and Zurich was told to contact Claims Manager Jeff Pryor to discuss settlement. On Jan. 3, 2006, Pryor communicated with Zurich advising, "Our client has accepted your offer in the amount of $16,700." A release form was then forwarded from Zurich to the Nunn office.

Carol Bay testified in court that on Jan. 2, 2006, she told Dean Arnold, another attorney in the Nunn office, that she needed to consult with her husband before accepting the settlement offer. When the Bays received the settlement offer on Jan. 17, 2006, they rejected it in writing by noting the rejection of the settlement in two separate locations.

The Bays appealed the motion to enforce settlement agreement, arguing that the "attorney for the Bays" did not have actual or apparent authority to make the settlement agreement. They conceded the law office could enter into settlement negotiations and also that the Bays knew of such negotiations, but not that Nunn's office could agree to any settlement. The Court of Appeals agreed with the Bays argument, stating there was no evidence that Carol Bay told Arnold to accept the Zurich offer.

Pulliam maintained that Arnold had authority to enter the binding agreement per the conversation between himself and Bay on Jan. 2, in which she said she wanted to "settle the case." That is not evidence that she accepted the offer or gave Arnold authority to do so, the court ruled.

Senior Judge Sullivan wrote in the opinion, "The law is clear that retention of an attorney by a client does not constitute implied authority to settle a claim nor does it constitute a manifestation to third parties that the attorney has apparent authority to do so in an out-of-court proceeding."

Citing Gravens v. Auto-Owners Ind. Co., 666 N.E. 2d 964 (Ind. Ct. App. 1996), the court wrote, an attorney may not settle a claim without the client's consent.

In this case, Zurich assumed the Nunn office had the authority to approve the settlement, when it in fact did not, the court ruled. The acceptance of the settlement by the claims manager in the Nunn office was not binding upon the Bays. The Court of Appeals reversed the order of the Marion Superior Court and remanded for further proceedings.
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  1. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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